From 1964 through 1994, the accumulated inflation rate in Brazil fetched 1,000,000,000,000,000 % (that�s one quatrillion percent) !! This fantastic figure is not an estimative; it turned out calculated by Joelmir Beting, a rightly respected Brazilian journalist, determined by the official inflation numbers.
The first report was published by Veja in Dec. 1996, but it�s available on:series for subscribers only; read several comments about the matter written by Joelmir Beting himself; if you wish to calculate the inflation yourself, the official monthly inflation rates can be found at Fundacao Getulio Vargas – IGPs.
Why did the inflation last way too long in Brazil?
To start with, the Brazilian inflation rate was very on the way of the costa rica government; the Mint printed money night and day, at a really low cost to the Treasury (the Treasury was collecting an inflationary tax); this was fixed in nominal values, which were corroded in a short time, leaving the costa rica government with a carte blanche for it to cost the budget; by delaying payments (to suppliers, to servants, to people who won demands in Justice), the us government what food was in fact getting discounts.
Second, there were in Brazil something called “monetary adjustments” (corre��o monet�ria): anything left in the bank was automatically paid interest, overnight (Brazilian banks needed to gain much efficiency to work using this high inflation); so, the center class had their savings protected from inflation corrosion, and didn�t pressure the Government for the tougher combat against it; naturally, as Beting notes on his article, someone were required to support the burden, and those were the massive most Brazilians who didn�t have any savings left find in the bank system.
Last, there was clearly the natural difficulty in understanding and combating inflation inside a complex country like Brazil: a lot of the best economists in Brazil put their knowledge and good will on the service with the government, but, before 1994, each of them failed).
Until 1986, inflation was fought (mostly) by following the Economics books. That year, yearly inflation was running at a lot more than 100% for that second year back to back (1985: 225%), and also the government felt the necessity to consider more extreme measures against it.
In March of 1986, President Jose Sarney announced the Plano Cruzado, anchored in practically only one idea: all prices from the Economy were frozen (including salaries, these had a rise first). The President assigned all citizens while using job to manage prices in most shop in the united kingdom; TV showed supermarkets being closed and managers being arrested, because prices have been raised. The seductive plan worked fine just the summer months (in November of 1986, the Party with the President won elections out of all Brazilian States), but natural sequels soon appeared: forbidden from changing prices, the producers either refused to sell (setting up a illegal hacking community for many products) or simply relaunched “new” products which has a “new” higher price. Late in 1986, soon after the elections, the us government sported Plano Cruzado II, using a general increse of prices and taxes.
From 1986 through 1994, added heterodox Plans were deployed. In 1987, the Bresser Plan (named following a Minister of Finances) again froze prices and salaries, besides cutting budgetary investments; outcome: accumulated inflation for 1987 was 366%. In 1989, our summer Plan once again froze prices and proposed the privatization of State companies as well as the dismissal of civil servants; in December alone, the inflation was over 50%.
In 1990, the wildest plan of, the Collor Plan. President Fernando Collor had taken office promising to kill the inflation with only 1 shot; accumulated inflation from March 89 to March 90 was almost 5,000%. The principle measure with the Collor Plan ended up being to freeze all financial assets in bank accounts which exceeded several thousand dollars (the amount of money can be gradually returned to investors only after eighteen months); again, prices and salaries were frozen, budget expenses were cut, taxes were increased; the seductive plan brought recession to Brazil, but didn�t stop inflation (December 90: 19.39%; 1990: 1198%). In 1991, the sequel: Plan Collor II; besides the usual prices freezing, this plan of action attacked the indexation: all short-run financial transactions (which paid interest daily) were prohibited; here is the plan Collor II failed, much because the President – who would be impeached in 1992 – had a weak political support.
After Brazil overcame the imense inflation rates of its past Brazilian bonds and stocks are today are favorite investment vehicle for investors around the globe.
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